All or none order aon

What Is All or None Order (AON)?

An All or None (AON) order is a type of trade order in finance and securities trading that specifies the entire order must be executed or none of it will be executed. This means that partial fills are not permitted. AON orders fall under the broader category of order types used in securities trading, where traders give specific instructions to their brokers regarding the execution of a buy or sell order⁴⁰, ⁴¹. The primary purpose of an AON order is to ensure that a transaction occurs only if the complete desired quantity of shares or contracts can be traded at the specified price, preventing an investor from holding an incomplete position³⁹.

History and Origin

The evolution of trading systems has led to various order types, including the All or None order, designed to cater to diverse investor needs. Historically, many stock exchanges operated on an "open outcry" system, where brokers manually communicated orders on a trading floor³⁸. With the advent of electronic trading systems, first seen prominently on the London Stock Exchange in 1986 and later with the National Stock Exchange of India in 1994, the sophistication of order types expanded³⁷.

Regulatory bodies, such as the U.S. Securities and Exchange Commission (SEC), oversee market practices, including order execution³⁶. The rules governing specific order types like AON orders are often detailed by individual exchanges and regulatory bodies. For instance, the NYSE American LLC, as a self-regulatory organization, has clarified the functionality of AON orders within its rule framework, emphasizing that they must be executed entirely or not at all and have specific rules regarding display and routing³⁴, ³⁵. These clarifications ensure transparency and consistent application of such contingent orders within the broader financial markets.

Key Takeaways

• An All or None (AON) order requires that the entire quantity of an order be filled; partial executions are not allowed.
• AON orders are particularly useful for investors who need to acquire or dispose of a specific, large block of securities without partial fills that could disrupt their portfolio allocation or hedging strategies³³.
• While AON orders prevent partial fills, they may take longer to execute, especially for larger order sizes or in less liquid markets, because a single counterparty or sufficient liquidity must be found for the entire order³².
• These orders are considered contingent orders and remain active until they are fully executed or canceled by the investor³¹.
• AON orders are not typically displayed on public order books in a way that reveals their full size, to prevent market impact, making them akin to hidden orders in some contexts²⁹, ³⁰.

Formula and Calculation

An All or None order does not involve a specific mathematical formula or calculation. Its nature is a conditional instruction for order execution rather than a quantitative measure. The "all or none" condition simply dictates the quantity requirement for a trade to be valid.

Interpreting the All or None Order

Interpreting an All or None (AON) order primarily involves understanding its conditional nature within the context of trade execution. When an investor places an AON order, they are prioritizing the complete fulfillment of their desired quantity over immediate execution or potential partial fills. This type of order communicates a clear instruction: either the entire specified number of shares or contracts is traded, or the order remains unexecuted.

This interpretation is crucial for situations where an incomplete trade would be disadvantageous. For example, in a hedging strategy, if only a portion of the required shares is bought or sold, the hedge might become ineffective or expose the investor to unintended market risk. Therefore, an AON order ensures that the intended protective or strategic purpose of the trade is fully realized. It signals to the broker that the investor's objective can only be met with a complete transaction.

Hypothetical Example

Consider an institutional investor, Diversified Capital, seeking to acquire 10,000 shares of TechGrowth Corp. stock. TechGrowth Corp. is a moderately traded stock, and Diversified Capital wants to ensure they obtain the entire block of shares to maintain a specific investment weighting in their diversified portfolio.

Instead of placing a standard limit order for 10,000 shares, which might result in several partial fills throughout the day at various prices, Diversified Capital places an All or None (AON) limit order for 10,000 shares of TechGrowth Corp. at a price of $50 per share.

• Scenario 1 (Execution): Later in the day, a large sell order for 12,000 shares of TechGrowth Corp. at $50 per share becomes available in the market. Since the entire 10,000 shares requested by Diversified Capital can be filled at their specified price, their AON order executes fully. Diversified Capital now holds exactly 10,000 shares, fulfilling their portfolio objective.

• Scenario 2 (No Execution): Throughout the day, multiple smaller blocks of TechGrowth Corp. shares become available at $50—for example, 3,000 shares, then 5,000 shares, then another 1,500 shares. None of these individual blocks are large enough to satisfy the entire 10,000-share AON order. In this scenario, the AON order will not execute, and it will remain active until the full 10,000 shares become available at once or the order is canceled. Diversified Capital avoids holding an incomplete position.

This example highlights how the AON condition ensures that the order is a single, complete transaction, aligning with the investor's specific requirements.

Practical Applications

All or None (AON) orders find several practical applications across various facets of financial markets, particularly for institutional investors and those executing larger trades.

• Large Block Trades: AON orders are frequently used for block trades, which involve a substantial number of shares, often 10,000 shares or more, or a significant total market value. ²⁸Institutional investors, such as mutual funds, pension funds, and hedge funds, utilize AON orders to buy or sell large positions without fragmenting the order into smaller, potentially price-impacting pieces. ²⁷This helps them maintain precise portfolio allocations and manage large-scale capital deployment.
• Preventing Partial Fills: One of the core advantages is preventing undesirable partial fills, which can occur in thinly traded securities or when a specific position size is critical. ²⁶For instance, a hedge fund seeking to establish a precise delta-neutral position might use an AON order to ensure all components of the hedge are acquired simultaneously, avoiding a misaligned risk exposure.
• Strategic Market Impact Management: By not allowing partial execution, an AON order can help avoid signaling a large trading interest to the market through multiple smaller trades, which might otherwise cause adverse price movements. This is especially relevant in less liquid assets, where even moderate trading volume can significantly impact price. ²⁵According to Charles Schwab, AON order qualifiers may help prevent a partial fill, but they may also prevent the order from being executed at all because they cannot be held on the exchange limit order book. ²⁴AON orders generally require that the entire order be executed at a single venue, which may not be possible if the order were broken up and sent to multiple venues.
  ²³* Regulatory Compliance: For certain regulated entities like mutual funds, which must adhere to specific diversification requirements under acts like the Investment Company Act of 1940, AON orders ensure that entire blocks of securities are bought or sold as planned, simplifying compliance by avoiding adjustments caused by partial fills.
  ²²* Specific Investment Needs: Retail investors, though less common users, might find AON orders useful in highly volatile markets or for illiquid stocks where they want to ensure a complete acquisition or disposal without the risk of being left with a fragmented position at shifting prices.
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Limitations and Criticisms

While All or None (AON) orders offer specific advantages, particularly for large transactions, they also come with notable limitations and criticisms that investors should consider.

• Reduced Likelihood of Execution: The most significant drawback of an AON order is that it significantly reduces the likelihood of execution, especially for large order sizes or in less liquid securities. ²⁰Because the order requires a single, complete fill, it must wait until an opposing order of sufficient size becomes available. This can lead to the order remaining unfulfilled for extended periods or even expiring without execution.
  ¹⁹* Delayed Execution: Even if an AON order is eventually filled, the execution time can be considerably longer compared to a standard market order or even a limit order that allows partial fills. This delay can be problematic in fast-moving markets where prices can shift rapidly, potentially causing the investor to miss out on favorable pricing.
  ¹⁷, ¹⁸* Lack of Price Improvement: AON orders may limit opportunities for price improvement. If the market offers better prices for smaller quantities that sum up to the total, an AON order will ignore these opportunities, waiting instead for a single block at or better than the specified price.
• No Guarantee of Price (with market AON): While a limit AON order specifies a price, a market AON order (less common) offers no price guarantee, similar to a regular market order, but still carries the execution risk of waiting for a full quantity. ¹⁶In volatile conditions, the executed price could be far from the last quoted price.
• Market Impact Risk (if not handled discreetly): Although AON orders are often used to mitigate market impact by not displaying the full size, if a large AON order is eventually filled, its execution could still cause a sudden price movement if it absorbs significant market liquidity at once.
• Exchange-Specific Handling: The exact behavior and priority of AON orders can vary between exchanges and brokers. Some exchanges may not display AON orders in their primary order book, giving them lower priority compared to other order types, which further reduces their chances of immediate execution. ¹³, ¹⁴, ¹⁵FINRA rules also indicate that AON orders are an exception to the requirement for market makers to display customer limit orders.
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All or None Order (AON) vs. Fill or Kill (FOK)

All or None (AON) orders and Fill or Kill (FOK) orders are both contingent order types that demand complete execution, but they differ fundamentally in their time constraints.

The key distinction lies in the "time in force" condition. An AON order prioritizes quantity over time, allowing the order to remain active for an extended period, such as a day order or a good-til-canceled (GTC) order, until a full match is found. ⁹, ¹⁰, ¹¹In contrast, an FOK order prioritizes both quantity and immediacy; if the entire order cannot be filled instantly, the order is immediately canceled. This makes FOK orders suitable only for highly liquid securities where large blocks can be absorbed instantly. The choice between an AON and an FOK order depends entirely on whether the investor values persistence in waiting for a full fill (AON) or demands immediate confirmation of a complete fill (FOK).

FAQs

When is an All or None order most useful?

An All or None (AON) order is most useful for investors, particularly institutional ones, who need to ensure that their entire desired quantity of a security is bought or sold in a single transaction. This is often the case when a partial fill would be detrimental to a portfolio's structure, a hedging strategy, or when dealing with large blocks of shares where fragmented execution could cause unfavorable price movements.

Can an All or None order be partially filled?

No, by its very definition, an All or None (AON) order cannot be partially filled. ⁷, ⁸It specifies that the order must be executed in its entirety, or it will not be executed at all.

How long does an All or None order remain active?

An All or None (AON) order can remain active until it is either fully executed or canceled by the investor, depending on the time-in-force instruction attached to it. Common time-in-force settings include a day order (expires at the end of the trading day) or a good-til-canceled (GTC) order (remains active until filled or canceled).
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Do All or None orders affect market price visibility?

Yes, All or None (AON) orders generally do not appear in the publicly displayed order book at their full size. This is to prevent the large size of the order from influencing market perception or price. ³, ⁴Instead, they are typically held by the broker or on an exchange's internal system until a matching counter-order for the entire quantity becomes available.

Are All or None orders common for retail investors?

All or None (AON) orders are less common for typical retail investors compared to institutional investors. ²Retail trades are generally smaller in size, and the benefits of an AON order (preventing partial fills, managing large blocks) are usually not as critical for individual, smaller transactions. Most retail investors utilize standard market orders or limit orders for their trading needs.¹